a. Mozer's Garden Solutions has a chain of retail stores in the Midwest. Mozer's orders hedge trimmers from a wholesaler. Every year Mozer's requires 9,000 hedge trimmers. The trimmers cost $250 per trimmer from their wholesaler.
The estimated cost of ordering at the wholesaler and paying shipping fees is $200 per order: K = $200 The holding cost per hedge trimmer is estimated to be 10% of the cost of the trimmer h = 0.1 × $250 = $25
Using the economic ordering quantity model, what is the order size that would minimize the total costs for ordering and storing the hedge trimmers?
EOQ = SQRT(2*K*R/h)
b. Mozer's also orders their garden rakes from a wholesaler. Every week Mozer's requires 10 rakes. There are 50 weeks in a year. The rakes cost $50 per rake from their wholesaler.
The estimated cost of ordering at the wholesaler and paying shipping fees is $45 per order: K = $45 The holding cost per rake is estimated to be 5% of the cost of the rake h = 0.05 × $50 = $2.50.
Using the economic ordering quantity model, what is the order size that would minimize the total costs for ordering and storing the rakes?
c. Economic Order Quantity: Using the information from Q2, how does the EOQ change if the demand for the rakes doubles to 20 rakes/week?